Aspiring beginner and niche farmers and farming practitioners have an array of USDA farming loans to choose from. There are loans, for instance, that serve various purposes from financing down payment on a farm to covering farm operating costs. The name of these loans? Microloans.
Qualifying for microloans from USDA Farm Service Agency just might be the big break you need in making small farming a sustainable livelihood or fulfilling hobby.
USDA Microloans: A Snapshot
The Microloan program is made up of (a) Direct Farm Ownership and (b) Direct Farm Operating Microloans. Each subset has its own set of uses and requirements.
Take a look at how these loans work per USDA FSA’s website.
1. Who can apply for microloans?
These applicants include but are not limited to:
- Beginning farmers
- Farmers engaged in non-traditional farm operations such as selling at farmers’ markets
- Farmers using conventional farming methods like hydroponics.
2. How to be eligible?
To qualify for direct farm ownership microloans, the applicant must hold three years’ farm management experience within 10 years of the application date. However, he/she may substitute a year of farming experience with equivalent experience such as successfully repaying an FSA Youth loan.
The direct farm operating microloan program requires applicants to have some farming experience, including but not limited to apprenticeship and mentorship. Those with minimal farming experience, for example, can work with mentors during their first production cycle.
Both these loans are not hinged on credit scores but it does require an acceptable repayment history through loans with the government or private lenders.
3. What are their acceptable uses?
In light of their name, direct farm ownership microloans can be used as down payment on a farming property or the down payment loan itself. Its other eligible uses are (a) building, rebuilding or improving farm structures and dwellings; (b) soil and water conservation projects; and (c) joint financing.
The purposes eligible for a direct farm operating microloan are myriad. There’s buying farming supplies fertilizer, livestock feed and seeds, and tools. The loan can be used for fencing the property and irrigating the farm. Other costs eligible for financing are family living expenses and certification with OSHA, GAP and GHP.
4. What are their general terms?
Microloans don’t have a minimum amount but they are capped at $50,000. This loan limit includes outstanding direct operating loans.
Having a microloan on top of an emergency loan, a guaranteed operating loan, or a farm ownership loan is allowed.
Interest rates depend on the type of the microloan. Direct farm operating loan rates are based on direct operating microloan rates. Likewise, direct farm ownership microloans adopt rates on direct farm ownership loans.
Their repayment terms also differ. Direct farm operating microloans, for instance, are repaid depending on the purpose of the loan. With direct ownership microloans, they are repaid up to 25 years.
5. Where can you apply for microloans?
You’ll be asked to fill out a request for microloan assistance and may be asked to complete some other forms.
For more information on microloans and other farm loan products, contact your local or state USDA Service Center.